Now that new legislation has cleared the way for Illinois school districts to build wind farms, three suburban districts are finalizing plans to become the first in the state to do so.
Carpentersville-based Community Unit District 300, Keeneyville Elementary District 20 and Prospect Heights District 23 plan to build a 19.5-megawatt wind farm in downstate Stark County.
School officials hope to use the electricity generated by the wind turbines to offset their energy bills.
The idea works in theory, but the struggle for the three districts has been to hit on a financial model that generates revenue for schools, protects taxpayers and passes legal muster.
After vetting a number of models since 2008, tossing some of them out because of potential legal snags, officials in the three districts say they are close to a model that works.
The latest model would combine private investment, a federal grant and bond proceeds. The school districts would then use tax credits and revenue generated from the sale of the electricity to pay off investors and bond holders.
While consultants still need to plug variables like the price of turbines and relevant interest rates into the equation, school officials say this is the model they will use if elected officials decide to proceed.
"In the general outline of our financials, we are set," said Dave Ulm, supervisor of facilities and energy management for District 300. "This is what we're using."
Here, in a much-simplified form, is how it would work:
A consortium made up of the three school districts would issue bonds that would cover about 43 percent, or $21 million, of the total construction cost (about $49.5 million).
A private investor would contribute about 27 percent, or $13 million. A grant through the U.S. Department of Energy would cover the remaining 30 percent, or $15 million.
The investor would take advantage of $23 million in new-market tax credits for the first seven years the wind farm is in operation.
At that point, the investor would have to leave and turn over ownership of the wind farm entirely to the consortium, or stay and pay the districts the entire sum of the bonds they initially issued ($21 million) - even if the districts have already paid off some of that total.
If the investor stays for the long haul, the districts stand to gain $10.3 million between them. If the investor leaves after year seven, as is hoped, the three districts could split $35.6 million between them, according to the model.
In an earlier model floated last year, the districts would issue Build America Bonds to finance the construction of the wind farm. These are subsidized by the federal government and, therefore, cheaper than traditional bonds.
But the districts have all but abandoned that idea after learning they most likely could not take advantage of both Build America Bonds and the new-market tax credits.
Instead, the districts now plan to use revenue bonds, which are backed by the revenue generated from the farm. These will probably carry higher interest rates but will allow the districts to benefit from the substantial tax credits.
The next step is for the school boards of all three districts to approve a three-way intergovernmental agreement formalizing the consortium. The boards will take up the issue in July and August.
Officials say they have until the end of 2010 to make a deposit on the wind turbines in order to qualify for the Department of Energy grant that is central to the funding model.
Until then, school officials and consultants will investigate whether the model they have devised is not only legal but also financially feasible.
Given the newness of what they are doing and the recent volatility of the economy, the answer is by no means certain.
"A lot of things that we're going through is kind of a discovery process," said Gary Ofisher, director of operations for District 20. "The law says we can do it, but no one has ever done it."